Category: Recent Decisions: Part A: Service Tax

Facts:
The appellant paid service tax under chartered accountants service and his services also included certain exempt services. It was detected by the audit team of the department that it did not maintain separate accounts for services used in providing taxable and exempted services as required under Rule 6(2) of the CENVAT Credit Rules, 2004. Before issue of Show Cause Notice, the appellant however paid an amount equivalent to CENVAT credit based on proportionate reversal method under Rule 6(3) (ii). However, the department issued Show Cause Notice, demanding payment of CENVAT credit under Rule 6(3) (i) being an amount equal to 8% / 6% of the value of exempted services, as the conditions of Rule 6(3A) were not followed.

Held:
The Tribunal after going through Rule 6(3A) of CENVAT Credit Rules,2004 observed that submission of details to department as prescribed in the said rule such as name, address and registration number etc. are mostly factual details which are available from record. It also noted that the department has not disputed the amount paid by the assessee before issue of notice as per Rule 6(3)(ii). In such circumstances, having regard to disparity of amount of CENVAT credit under both the options, it was held that It would be too harsh to enforce payment as per Rule 6(3)(i) only because of non-payment of the due amount on time as per procedure prescribed in Rule 6(3A). The Tribunal however further held that the conditions do require that option should be exercised in writing to avail the facility and amount of CENVAT credit attributable to exempted goods must be paid provisionally for every month.

Facts:
The
respondents availed health insurance services in March, 2011, payment
for which was made in March, 2011. However, the insurance was for the
period from April, 2011 to September, 2011. CENVAT credit on such
services was availed in March, 2011. Definition of input services was
substantially amended with effect from 1st April, 2011 with specific
exclusions. One such exclusion was in relation to insurance services,
when such services are used primarily for personal use or consumption of
employees. Accordingly, the department denied CENVAT credit since the
period of insurance was effective from 1st April, 2011. Commissioner
(Appeals) referred to Point of Taxation Rules, 2011 and also the
definition of Point of Taxation and concluded that CENVAT credit was
allowable to the extent of completion of provision of services prior to
1st April, 2011.

Held:
It is an undisputed fact that
services were availed prior to amendment, payment was made prior to
amendment and even CENVAT credit was taken prior to amendment.
Accordingly, provisions post amendment would not be applicable to the
activities completed prior to the date of amendment. As per the
definition, “Point of Taxation” means the point in time when a service
shall be deemed to have been provided. Accordingly, since everything was
completed in March, 2011, CENVAT credit was available.

Facts:
The adjudicating authority held that converting black rods/ bars into bright bars did not amount to manufacture during the relevant period and therefore the CENVAT credit taken on capital goods/black rods/bars used for making bright bars was not admissible. The appellant paid duty on their product, namely bright bars and the total duty paid by them was more than the amount of credit taken.

Held:
The Tribunal held that, converting black rods/bars into bright bars do not amount to manufacture as the said issue is covered by the decision of the Supreme Court against the assessee. However, relying upon various judicial pronouncements including decision of the Mumbai Tribunal in the case of Ajinkya Enterprises vs. CCE 2013 (288) ELT 247 (Tri. – Mum) which has been affirmed by the Hon’ble Bombay High Court, it held that CENVAT credit is allowed.

Facts:
The limited question for consideration in the present case was whether CENVAT credit can be denied to the recipient of input services if service tax is not paid by service provider. The department contended that the appellants should have taken precaution to verify the fact of discharge of service tax liability by service provider. Since service provider had not paid service tax liability, CENVAT credit was not admissible to service recipient.

Held:
Revenue could not provide any evidence on record to prove that the appellants were aware of non-payment of service tax by service provider before taking CENVAT credit. Service recipient would only see CENVATA BLE document. It was not the case of non-existence of service provider. Therefore, CENVAT credit was correctly availed.

Facts:
The
appellants had got service tax registration under a different category.
Department sought to levy penalty u/s. 77 of the Finance Act, 1994 for
failure to take registration.

Held:
Even though the
appellants were registered under a different category of service, they
were recognised under service tax law. Therefore, penalty under section
77 was not warranted.

Facts:
The appellant manufactured a minor part which was supplied to its clients with other imported goods under two divisible contracts. Excise duty was paid on the minor part, however, department demanded excise duty on services forming part of these contracts. It was argued that service component was already under adjudication under Finance Act, 1994 and the services should be automatically excluded from Central Excise laws in the present adjudication, specifically when the items were outside the purview of Central Excise. Since, Central Excise department was not aware of adjudication proceedings initiated by service tax authorities, they had requested for extension of time to verify the fact. However, even after a long time span, department did not provide any reply to the Tribunal.

Held:
The Tribunal examined appellant’s submissions and observed that the divisible contracts were executed specifically demarcating provision of services. In view of separate contracts for supply and service and laws relating to taxation of goods and services, it was held that services cannot be taxed under Central Excise laws.

Facts:
In view of centralised accounting system, the appellate authority allowed facility of centralised registration at the head office of the respondents, being the recipient of Goods Transport Agency services. Revenue argued that the rejection of centralised registration was through a letter, which cannot be appealed against and only service providers can be granted with centralised registration.

Held:
It is a well-settled law that a letter, conveying grounds of rejection and also the rejection, is an appealable order. The argument, that only service providers are eligible to obtain centralised registration, is meaningless and would defeat the objective of such registration. In Indirect tax laws, registration is linked with taxpayer, which is service recipient in the present case. Since respondents satisfied the conditions for centralised registration, centralised registration was rightly allowed.

Facts:
The Assessee filed refund claim of input service before the Assistant Commissioner of Service Tax, Chennai. The claim however was returned stating that the application was to be filed with the jurisdictional Assistant Commissioner of service tax. Consequently, the Assessee filed the claim accordingly. Thereafter, the claim was rejected on ground of time-bar. The first appellate authority granted relief by holding that the refund claim cannot be rejected on the ground of limitation when the claim was originally filed in time but before wrong authority, relying on the Tribunal’s decision in case of Gujarat Tea Processors and Packers Ltd [2010 (17) STR 489 (Tri-Ahmd)]. Hence, the revenue filed the appeal.

Held:
The Tribunal held that the decision of the first appellate authority was appropriate and took the view that the date of filing of refund claim before the wrong authority to be taken as the date of filing for determining limitation and rejected the department’s appeal.

Facts:
The assessee was manufacturing on job-work basis for his principal and also collected a fixed amount as service charges towards certain services provided to the principal. The department was of the view that these expenses incurred for providing the services were in the nature of overheads essential for manufacturing activity and therefore were required to be reckoned while the assessable value of the finished goods was calculated for payment of duty. In August 1996, the department recorded statement from the officials of the assessee-company. A show cause notice was issued in October 1998 for the period 1995-96 to November 1997. The Tribunal upheld the intention of evasion for the receipt of service charges from their principal as the activities of the assessee came to light subsequent to an investigation by the department. However, it also held that, as the department was aware of the activities of the assessee after recording the statement, demand under extended period is valid only to the extent it pertains to the period prior to August 1996. Before the High Court, assessee contended that if there is no suppression post August, 1996, no extended period could be invoked post August, 1996 and, therefore, the same analogy will have to be applied for the period prior to August, 1996 as well.

Held:
The High Court affirmed the order of the Tribunal on the ground that, findings recorded by the Tribunal in so far as the period prior to August, 1996 and post August, 1996 stems from strong judicial reasoning and there is no error on record warranting interference with the well considered finding of the Tribunal.

Facts:
The assessee filed writ petition before the High Court as both the lower appellate authorities did not entertain the appeals filed by the petitioner on the ground that it was time barred and beyond permissible period for condonation. The contention of the petitioner was that attempt to prefer appeal unsuccessfully before the appellate authority does not preclude him from maintaining the writ as at present he is remediless.

Held:
Relying upon decision of the Court in the case of Resolute Electronics (P.) Ltd. vs. Union of India [WP No.1409 of 2015] and quoting judgment of Supreme Court in the case of Singh Enterprises vs. CCE [2008] 12 STT 21 (SC), the Court held that it is not legally permissible to accept the challenge to the order in writ jurisdiction when Appellant has unsuccessfully pursued other remedies for if it is done, the writ Court will unsettle a legally settled position. Thus, where appellate authority has already decided the matter against the petitioner, the writ Court is debarred from doing so as the same binds the writ Court applying the principle of res judicata, particularly, when the appellate authority’s orders are not challenged in the writ jurisdiction. Accordingly, the writ petition was dismissed as not maintainable.

Facts:
The assessee manufactures excisable goods falling under Chapter 86. During the disputed period, though it was entitled for exemption under Notification No.62/95- CE dated 16/03/1995, it cleared the exempted goods on payment of duty. It however did not pay duty on ferrous and non-ferrous scrap since as per Notification No.89/95- CE dated 18/05/1995, waste parings and scrap arising in the course of manufacture of exempted goods and falling within the schedule to the Central Excise Tariff Act, 1985, were exempted from the whole of excise duty. Department issued show cause notice demanding duty on the ground that as per the proviso to the said notification, such exemption would not be applicable if waste parings and scrap cleared from a factory in which any other excisable goods other than exempted goods are also manufactured. The case of the department was that since assessee cleared the goods after payment of duty and did not avail benefit of exemption notification No.62/95- CE, the goods cleared from factory cease to be exempted goods and hence benefit of notification No.89/95-CE is also not allowed to assessee. The Tribunal decided in favour of assessee

Held:
The High Court observed that erroneous payment of duty caused the department to hold that the goods are other than exempted goods and therefore demand was made. Affirming the Tribunal’s order it was held that proviso to this Notification would not apply to the facts of the case and the erroneous payment of duty would not render the goods other than exempted goods. Hence, so long as the goods manufactured are exempted goods, waste parings, scrap arising in the course of the manufacture of exempted goods would be entitled for the exemption.

Facts:
The assessee manufacturer sent goods to their sister concern for Chrome Plating on job work basis. After completion of the process of chrome plating, the sister concern returned the said goods to the assessee under cover of an invoice on payment of service tax on the value of job work charges and subsequently on receipt of such job worked goods, the assessee availed CENVAT credit of service tax so passed on by its sister concern. The job worked goods thereafter passed through various manufacturing processes at the assessee’s factory and then were cleared on payment of duty. As per department’s contention, the process of chrome plating does not amount to manufacture in terms of section 2(f) of the Central Excise Act, 1944 but is a “business auxiliary service” liable for payment of service tax. However an exemption is granted under Notification No. 8/2005- ST dated 01/03/2005 to taxable service of production of goods on behalf of the client on which appropriate duty is paid by the principal manufacturer. According to the department the said exemption notification is an unconditional notification and section 5A(1A) of the Central Excise Act, 1944 which mandates the assessee to avail the exemption notification is applicable to the facts of the case. Therefore, service tax has been charged wrongly in order to pass on service tax credit to assessee. The Tribunal decided in favour of assessee and the revenue is in appeal.

Held:
The High Court observed that, the said Exemption Notification applies only in cases where such goods are produced using raw materials or semi-finished goods supplied by the client i.e. the principal manufacturer and goods so produced are returned to the said client for use in or in relation to the manufacture of the goods on which appropriate duty of excise is paid.

Therefore the High Court held that the conditions stipulated in the notification establish that it is a conditional notification. As regards applicability of section 5A of the Central Excise Act, 1944 it was held that the mandatory requirement on the manufacturer of such excisable goods of not to pay the duty of excise on such goods in respect of which an exemption u/s 5A(1A) has been granted absolutely is not found in section 93 of the Finance Act, 1994. Further, absence of section 5A of Central Excise Act, in section 83 of the Finance Act, 1994, which provides for application of certain provisions of the Central Excise Act,1944 in relation to service tax, indicates that the provisions of section 5A of Central Excise Act, are not applicable to the Finance Act, 1994. Accordingly, the Tribunal order was upheld and CENVAT credit of the service tax paid by the job worker was allowed to the assessee.

Facts:
The department during the adjudication passed an ex-parte order confirming the demand on Appellants. Appellants filed appeal and stay petition before Tribunal. Before the date of hearing on stay application, Appellants sought adjournment by filing request letter. Tribunal granted an adjournment without even taking into account the said request letter on record. Before the next date, Advocate of Appellant requested an adjournment vide a request letter. Tribunal on that occasion overlooked the letter and passed an ex-parte stay order stating that since no plea of financial hardship was taken, Appellant was directed to pre-deposit Rs.4 crore and also recorded that the Appellants had not cooperated during the adjudication process and also in the present appeal proceedings which amounted to abuse of the process of law.

Held:
Appellants challenged the said ex-parte order before the High Court stating that the Tribunal is entitled to grant three adjournments to a particular party as per proviso to section 35C of the Central Excise Act. The High Court observed that the Tribunal’s action of deciding the stay petition ex-parte on second adjournment and that too ignoring the Appellants request for an adjournment terming non-appearance as abuse to process of law is too harsh. Accordingly, the case was remanded to Tribunal for reconsideration and directed Appellants not to seek adjournment on the next date.

Facts:
An Order was passed confirming demand proposed in the Show Cause Notice. Appellants preferred an appeal before first appellate authority along with stay application which was not disposed of. Meantime, the department initiated recovery proceedings by issuing notice for recovery. Appellants filed writ petition challenging the said recovery notice.

Held:
The High Court held that since the right of appeal has been exercised by the Appellants as per applicable provisions and since first appellate authority has yet to decide the stay application, the recovery notices though executable, could not be enforced or else the appeal will be infructuous or lead to multiplicity of proceedings. Enforcement of recovery was thus stayed till disposal of the stay petition by the first appellate authority.

Facts:
The Appellant is a 100% EOU and procured goods duty free. They also procured furnace oil on payment of duty and took CENVAT credit thereof. The adjudicating authority was of the view that the Appellant is allowed only one of the two options i.e. either to procure goods duty free or to pay duty and avail CENVAT credit. Therefore CENVAT credit taken of duty paid on furnace oil was disallowed.

Held:
The Tribunal observed that as per Rule 3 of the CENVAT Credit Rules,2004, 100% EOUs are fully eligible to take CENVAT credit of duty paid on inputs used in or in relation to the manufacture of final products because this rule does not make any exception as regards 100% EOUs. It held that Notification No. 18/2004-C.E. (N.T.) dated 06/09/2004 did not in any way affect the eligibility of the EOU from taking CENVAT credit; it only allowed them the facility to pay duty either by debit to the PLA or by debit to the CENVAT credit account. Reproducing Para 4 of Circular No. 54/2004-Cus., dated 13/10/2004 and decision In the case of Tata Tea Ltd. vs. CCE 2006 taxmann.com 1952 (Bang. – CESTAT), the Tribunal further held that the legal position is clear that the 100% EOUs are eligible to take CENVAT credit of duty paid on the raw material procured by them for use in or in relation to the manufacture of their final product. Accordingly the appeal was allowed.

Facts:
The assessee was engaged in the
manufacture of natural gases having units at various places. Assessee’s
one unit took credit of Customs House Agent (CHA) services where invoice
was in the name of Head Office; and also of machine repair services
where invoice was in name of another Unit. The demand of duty was raised
because the invoices under which the credit was availed were in name of
Head Office/other units and assessee was not registered as Input
Service Distributor.

Held:
Tribunal held that since
assessee had nine units manufacturing the same product, the doubt of
nexus of input and output products would never arise. It is quite
natural that the service provided by a CHA would be in the name of the
Head Office as the clearance of goods through customs is centralized.
The only basis for denying credit has been that invoices are either in
the name of another unit of the appellant or in the name of their Head
Office. Since doubt has never been raised regarding actual receipt of
services, credit cannot be denied.

Facts:
The Respondent is providing services in the nature of advice on investment opportunities and is also providing back office operation support to the firms situated outside India. The payments are received in convertible foreign exchange. A refund claim was filed in respect of service tax paid on the input services used and consumed by them in the course of providing output services which were exported. The Adjudicating Authority rejected the claim. The Commissioner (Appeals) allowed the refund claim citing the CBEC Circular No. 111/5/2009-ST dated 24/02/2009 clarifying the term “used outside India” to mean that the benefit of the service accrues outside India. Therefore, revenue has preferred the present Appeal.

Held:
The Tribunal held that Rule 3(i)(iii) and Rule 3(2) of the Export of Services Rules, 2005 is satisfied as the recipient is located outside India and the payment is received in convertible foreign exchange. Relying on the Larger Bench decision of Paul Merchants Ltd vs. Commissioner of Central Excise, Chandigarh [2013(29) STR 257 (Tri. Del) the Tribunal allowed the refund claim. Accordingly, the plea of the revenue that the services were used for making investment in India and therefore cannot be treated as export, was dismissed. Further in the matter of back office support operations, relying upon the decision of Commissioner of Central Excise, Hyderabad vs. Deloitte Tax Services India Pvt. Ltd [2008 (11) STR 266 (Tri.-Bang)] the Tribunal held that since the client was situated outside India, it is an export of service.

Facts:
The Respondent, a wholly owned subsidiary of a foreign company is engaged in procuring purchase orders from Indian customers on behalf of the foreign company. Goods are supplied in India and they receive “indent commission” in convertible foreign exchange at a predetermined percentage. A refund claim was filed for the service tax wrongly paid by them on the export of services. Adjudicating authority rejected the claim stating that the condition of export of services was not satisfied. Commissioner (Appeals) allowed the refund, therefore revenue is in Appeal.

Held:
The Tribunal noted that if the respondents did not canvass the purchase orders and sent it to the foreign company, there would be no supply of goods or use of goods in India at all. Therefore the service is definitely utilized/benefited by the foreign company. Merely because the goods supplied were ultimately used in India, cannot be a reason to hold that there was no export of the output service. Accordingly, it was held that the effective use and enjoyment of the service is by the foreign company and therefore refund is allowable as the services were exported.

Facts:
Respondents undertook work as incidental to fabrication of Iron Steel Products supplied by the manufacturer. Department alleged that they provided services of Supply of Manpower. It was argued that the consideration is received and charged on per metric ton of output and is done on a job basis which was supported by the invoices. The First Appellate authority cancelled the demand, against which revenue is in appeal.

Held:
The Tribunal concurred with the views of the first appellate authority who noted that the charges do not have any nexus with the number/nature/scope of manpower supply and charges pertained to various types of activities and quantity of material involved. Further, the activity was with respect to goods which were still on the production line of the manufacturer, therefore the respondents were entitled to the benefit of exemption notification no. 8/2005-ST which exempts the taxable service of production of goods on behalf of the client. Relying on the decision of M/s. Ritish Enterprises vs. CCE, Bangalore [2010 (18) STR 17 (Tri.-Bang) the order of the first appellate authority was confirmed. A similar decision was also rendered in the case of Commissioner of Central Excise, Nagpur vs. Shri GM Mate, Shri Babulal Ladse [2015-TIOL-1663- CESTAT-MUM].

Facts:
Appellant is an institute providing mid-day meal to the schools under the Government Scheme. The institute prepares food as per the fixed menu and supplies to the schools and is neither supplying any crockery etc. nor is involved in serving the meal at the school. The department sought to levy service tax under outdoor catering service. Besides, the space in the institute was also made available to various persons for their functions. The Commissioner confirmed both the demands under outdoor catering and mandap keeper services respectively. Aggrieved by the same, the present appeal is filed.

Held:
The Tribunal noted that the Appellant was neither preparing the meals at the school nor serving them and the meals were only supplied at pre-determined rates. Accordingly, it was held that the activity was not a taxable service of outdoor catering. Though the Appellant was a ‘caterer’ within the meaning of section 65(24) of the Finance Act, 1994, the Tribunal stated that the service covered u/s 65(105)(zzt) of the Finance Act, 1994 was that of an “outdoor caterer” and not by a ‘caterer’. Further in respect of the second matter, it was confirmed that mandap keeper service was provided by them, however since the turnover was below the threshold limit, they were exempted from the service tax.

Facts
The Appellant had entered into six lumpsum turnkey contracts prior to 01/06/2007 each having three parts and a consideration for each of the parts viz. designing, procurement of various capital goods and thereafter installation of such goods was ascertainable. They were discharging service tax in respect of designing under “consulting engineer service”. No service tax was discharged in respect of the third part considering it to be an indivisible works contract comprising of both goods and services on the basis of the decision of the Tribunal in the case of Daelim Industrial Co. Ltd vs. CCE, Vadodara [2006(3) STR 124(T)]. Member (Judicial) and member (technical) had divergent views both in respect of taxability as well as invocation of extended period and therefore the matter was placed before the third member.

Held:
The third member distinguished the decision in the case of Daelim Industrial Co. Ltd (supra) by stating that the said decision has not taken into account the 46th constitutional amendment which inserted clause (29A) in Article 366 of the constitution mandating that the indivisible contracts could be split up and a part of it could be subject to tax. The member relying on the decision of the five member Bench reported in 2015-TIOL-527-CESTAT-DEL-LB held that works contract can be vivisected prior to 01/06/2007 and the service portion can be subjected to levy of service tax. In respect of extended period, the member noted that the same is a question of facts and law and stated that if the Appellant had a bonafide belief, they would have reflected the transaction as an exempted service in the service tax return and by not doing so, they had suppressed the material fact from the department. Further, it was also stated that though there are divergent views of various forums, a large number of them are based on Daelim Industrial Co. Ltd. (supra) which is irrelevant to the issue and the remaining are expressed after 2007. Thus, when tax was rightfully discharged in respect of designing activities it ought to have been discharged on the installation activity being the dominant service in these contracts and accordingly extended period invokable.